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Changes in European prospectus regime: a new EU Prospectus Regulation

A new Prospectus Regulation (2017/1129) entered into force on 20 July, 2017, although most provisions will apply as of 21 July, 2019. It addresses various perceived deficiencies in the existing prospectus regime. It is noteworthy that two exemption provisions, which are particularly relevant for share issuers, will enter into effect immediately.

These exemptions are:

The current exemption from the prospectus requirement for the listing of a maximum of 10% new securities within a 12-month rolling period will be increased to allow the listing of a maximum of 20% new securities without a prospectus within a 12-month rolling period. This gives listed companies more flexibility when making stock-for-stock acquisitions and raising equity capital generally.

The current unlimited exemption from the obligation to prepare a prospectus for the listing of new shares that result from the conversion of other securities (such as dual class of shares, non-employee options and convertible shares) will be restricted to 20% during a 12-month rolling period. It does not apply to existing convertible securities, or convertible securities that were offered or listed based on a formal prospectus.

The majority of the new regime will enter into force with effect from either 21 July, 2018 or 21 July, 2019. In general, the new regime includes:

No EU prospectus will be required for offers of securities to the public below EUR 1 million. Member states will be allowed to set higher thresholds for their domestic markets; in the Netherlands the threshold will be raised from EUR 5 million to EUR 8 million.

An EU growth prospectus will be created for SMEs, mid-caps admitted to an SME Growth market or small issuances by non-listed companies.

An alleviated corporate bond prospectus will be available for admission to wholesale debt markets.

Frequent participants in the capital markets will have a frequent issuer regime that they can activate once an opportunity to raise funds arises. This will halve approval times from 10 days to 5.

There will be a lighter prospectus regime for issuers already listed on a public market that want to issue additional shares or raise debt.

Prospectus summaries will become shorter and the language used must be easier for investors to understand.

A paper prospectus will no longer be required, unless a potential investor explicitly requests a printed version.